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Deutsche Telekom staff on Thursday voted to strike in protest at attempts to cut the pay of a quarter of German staff. This marks an escalation of a bitter dispute that executives warn could result in Europe’s largest telecoms group being broken up.

Services union Verdi said stoppages would start on Friday after 96.5 per cent of union members at the group voted in favour of industrial action, bringing the prospect of further customer defections.

The announcement came after Telekom published figures that showed high costs continued to hinder it from making up for the loss of traditional clients by winning new broadband customers.

René Obermann, chief executive, called on Verdi to return to the negotiating table. “Strikes aren’t going to help anyone,” he said, stressing that Telekom would not change its plans.

In the first quarter, Telekom lost 588,000 traditional phone lines as clients switched to cheaper mobile or broadband services, more often than not run by rivals such as Telefónica or Vodafone.

The acceleration in losses – Telekom shed “only” 2m fixed-line customers during all of last year – outpaced the 572,000 new broadband customers taken on by the group, a best-ever performance.

Customer-flight and price competition saw fixed-line and broadband sales fall 4.2 per cent to €4.9bn (£3.33bn), and adjusted op­erating profit (ebitda) slump 17.9 per cent to €1.9bn in the quarter.

Only strong global growth in mobile telephony salvaged group results. Total sales rose 4.1 per cent to €15.5bn and operating profit, adjusted for one-off items, fell 5.8 per cent to €4.7bn.

Mr Obermann would not be drawn on the possible effects of the strike on the bottom line in 2007. He said he “currently [saw] no need to question” his goal of “around €19bn” operating profit.

Verdi’s chief negotiator Lothar Schröder said the strike would affect repairs of existing lines and installation of new ones.

Mr Obermann wants to cut €1bn off the wage bill by 2010 as part of a €5bn cost-cutting plan. The fight is his first big test since taking over in November. The German government and US private equity group Blackstone, the biggest shareholders, are watching closely.